The Japanese company Takata has paid a heavy price for its faulty airbag inflators. The company has officially announced its bankruptcy on Monday. Huge debts have forced the company's management to take this decision. It is estimated that the company's debts stand at around $ 9 billion.
Key Safety to take over operations
Takata is all set to sell off a major portion of its business to a rival. The Chinese-owned rival, Key Safety Systems, is based on the U.S. and it will take over Takata's operations with exception of the airbag inflators related segments. This segment will be wound down, says Takata.
This appears to be a smart move by Key Safety, which is paying $ 1.6 billion for its rival's operations. Takata's faulty airbag inflators caused the airbags to explode and cause severe injuries to the people in the vehicle. The faulty products forced many manufacturers to call back vehicles numbering into tens of millions. Nearly a dozen fatalities have also been reported in the U.S. alone, which can be traced back to the faulty airbags. This proved to be the beginning of the end for Takata. Given these circumstances, it seems to be a good move for Key Safety to avoid this part of the business entirely.
Takata had faced criminal charges
The Japanese manufacturer had not only produced the faulty airbags but also attempted to conceal the vulnerabilities from the public. Takata management had officially admitted that they had withheld information about the faulty products for a number of years although even then cases of airbags exploding in vehicles had begun to trickle in. A criminal charge of wire fraud was also leveled against the company and it pleaded guilty to the charge. Takata stands to pay out $1 billion towards this. This will be met from the sales proceeds after the operations are taken over by Key Systems. However, it is highly unlikely that shareholders of the company will break even at any point of time.
Following the rumors of the bankruptcy of Takata that were doing the rounds last week, the company's stock crashed by over 50%. Tokyo Stock Exchange has formally announced that the shares have been suspended as the company is to be delisted soon. Despite its disastrous airbag inflators segment, Takata's other operations continue to remain strong and are expected to stay that way in the near future.